# Electronic library

U.S. Census Bureau.

# TESTIMONY TAKEN BY THE JOINT SELECT COMMITTEE TO INQUIRE INTO THE CONDITION ...

. (page 7 of 60)
Font size

not only the amount of the policy, but also the following addi-
tional benefits: For each one hundred dollars of the sum in-
sured by the policy in the case of an infantile policy (issued at
age under ten) the additional benefit will be paid on the amount
of policy at the age of death."

Then follows a table. To find the amount payable on policy
in case of death in 1905 of the person insured, multiply the
amount insured in policy by 100 plus the additional benefit oppo-
site the year in which policy was issued, as above, and divide
the result by 100. Example: To find amount payable on policy
of \$144 issued in 1894 which has been in force for eleven full
years, multiply 144 by 103 and point off two places to the left,
and the result is \$148.22, and this amount will be paid by the
company in case of the death of the insured.

That means. Senator, that if that person who was insured in
1894 for \$144 dies in 1905 his beneficiary will receive \$4.22 more
than the face of the policy? A. Yes, sir.

Q. That is the additional benefit? A. That is it.

Q. After eleven years of payment at that rate and for \$144
the insured would have paid about how much for insurance?
A. Take the age, Mr. Gore, and look at the table — ^Mr. Hughes
has the table of rates here.

Q. I find in that table of rates that the insurance table is \$144

4897

Digitized by

Testimony of John F. Dryden

at age twenty-seven on a payment of ten cents a week, so
the payment of ten cents a week, \$5.20 a year for eleven years,
would then give the insured \$148.22? A. Yes.

Q. Now, going a step further, we find that after fifteen years
certain cash dividends are allowed by the policy, as follows: At
the end of fifteen years from the date hereof, and at the end of
each fifth year thereof this policy will be credited with a dividend
from the surplus apportioned by the company to policies of the
same class, payable in cash to the insured, unless payment shall
Below." Now, have you a statement of the dividends paid in

1904, what amounts are apportioned to industrial policies?

THE WITNESS: Have you got that statement, Mr. Gore?

Q. I am referred to the same circular. Exhibit 688 for identi-
fication, on the third page, for the cash dividends for the year

1905. These are cash dividends as distinguished from cash sur-
the year 1905, contains a table, appended to which is the follow-
ing: "To find cash dividends on a ten-cent policy, multiply the
above amount by 2, by 3 for fifteen-cent policy, and so on. For
example, on a policy issued in 1890, at age thirty, premium ten
cents, the company will pay in 1905, after the policy has reached
its fifteenth anniversary, a cash dividend of \$6.60." Can you tell
me approximately what proportion of your industrial policies
reached the fifteenth anniversary?

MR. GORE: Somewhere around eighteen per cent.

THE WITNESS: Eighteen per cent.

MR. GORE: Between sixteen and a half and eighteen per
cent.

4898

Digitized by

Testimony of John F. Dryden

Q. Between sixteen and a half and eighteen per cent, reached
the fifteenth anniversary and became entitled to be credited with
dividends. Does this statement which is handed me of dividends
purport to set forth the dividends under this provision allowed
on industrial policies? A. The first column.

Q. That does not include any other amount, but simply the
cash dividends allowed on industrial policies under the privilege
in the clause, "After fifteen years cash dividends"?

MR. GORE: No, it includes also additional benefits.

MR. HUGHES: I thought so. How are we to segregate
them to see what is paid actually or credited in the way of cash
dividends on policies that reach their fifteenth anniversary?
Have we any statement of that? Can you give that? A. I can
get it.

Q. Now, this provision for cash dividends, provides that at
the end of fifteen years from the date of the policy, and at the
end of each fifth year thereafter, dividends will be apportioned?
A. Yes, sir.

Q. The amounts which you have furnished in the statement
shown me gives the aggregate dividends allowed on industrial
policies in 1904, which include the additional benefits after five
years, the cash dividends after fifteen years, and also the cash
dividends on policies that had reached their twentieth.and twenty-
fifth and thirtieth anniversaries, does it not? A. Yes, sir, every
five years after fifteen years.

MR. HUGHES : I will read that upon the record.

DIVIDENDS, INDUSTRIAL.

1900 \$433,790

1901 446,966

1902 494,755

1903 569,566

1904 650,494

1905 (estmiated) 750,ooo

4899

Digitized by VjOOQ 16

Testimony of John F. Dryden

Q. Now, I should like to have those totals divided.

MR. GORE: I will get those.

MR. HUGHES : So we can see how much of these payments
stand for the five-year benefits, and how much for cash dividends
and will also indicate what amount of policies persist for fifteen
years, twenty years, twenty-five years, and so on.

THE WITNESS : The actuary will prepare that for you, Mr.
Hughes.

MR. GORE: I can give that to you now. (Producing paper.)

Q. I am furnished by the actuary of your company with a
statement of lapses which shows what issues of industrial policies
were in force on September 30, 1905. That is the percentage of
the issue of prior years then in force, as follows :

32.22 per cent, of the issue of 1900 in force September 30, 1905.
18.92 per cent, of the issue of 1895 in force at the same date.
13.05 per cent, of the issue of 1890 in force at the same date.
19.66 per cent, of the issue of 1885 in force at the same date.
6.01 per cent, of the issue of 1880 in force at the same date.

THE CHAIRMAN: That does not justify the actuary's fig-
ures that sixteen and one-half to eighteen per cent, persist for
fifteen years, because there it is only thirteen per cent.

Q. The Chairman suggests that that table does not justify your
suggestion that sixteen and one-half to eighteen per cent, persisted
for fifteen years, as it would appear that only 13.05 per cent,
insured in 1890 were in force in 1905.

4900

Digitized by

Testimony of John F. Dry den

MR. GORE : The year 1890 was a very peculiar year in that
respect. You will notice the year 1895 still has 19.66 per cent,
still in force. The average would be fully what I have stated.

MR. HUGHES: I think for the purposes of the record it
might be well if the actuary were sworn so he could interpolate
his answers as part of his evidence.

THE CHAIRMAN : Yes. I think so.

JOHN K. GORE was then duly sworn, testified as follows:

BY MR. HUGHES:

Q. In your judgment, Mr. Gore, sixteen and a half to eighteen
per cent, of the policies issued on the industrial plan would be
in force approximately at the end of fifteen years? A. Yes.

Q. And the table which you have just furnished me, and which
I have read upon the record, showing the percentages of the issue
of 1880, 1885, 1890, 1895 2ind 1900, inclusive, was made up by
you from the data on the company's record? A. Yes.

Q. And is believed by you to be correct? A. It is.

Q. Have you, Mr. Gore, any policies in force that were written
in 1875 or 1876, I believe your company was organized?

MR. DRYDEN: Practically 1876, we did not commence to
issue policies until 1876.

A. Policies in force?

Q. Yes. A. We have some.

Q. What percentage? A. Probably about six.

Q. It is six on 1880. A. They would be very close together.

JOHN F. DRYDEN resumed:

4901

Digitized by

Testimony 9f John F. Dryden

BY MR. HUGHES :

dends, which are totalized in the statement which has been put
upon the record, your industrial policy also provides for a cash
surrender value? A. Yes.

Q. But no cash surrender value is given until after twenty
years? A. That is correct.

Q. All the other benefits are in the nature of reversionary addi-
tions? A. Yes, sir.

Q. The table of cash surrender values, as stated in the policy
itself, and as I understand it, the cash surrender values available
at the end of twenty years, or of any fifth year thereafter, if the
policy is continued in force ? A. That is correct.

Q. Now, take for example a policy issued at age two, and con-
tinued for twenty years, then there would be on the surrender of
the policy and release of your company, how much paid in cash?
A. Seventeen dollars.

Q. That is on the basis of what payment? A. I do not know
that I understand.

Q. That is in case the insured has paid how much a week?
A. That is in case of a weekly payment of ten cents.

Q. And if the weekly premium is five cents? A. It would be
one-half of that amount.

Q. It would be one-half? A. Yes.

Q. Suppose he is insured at the age of twenty-one, and pays
ten cents a week for twenty years, what will be the cash surrender
value of the policy at that time? A. Thirty-three dollars.

Q. And if he is insured at age forty and carries the policy pay-
ing ten cents a week until he is sixty what will be the cash sur-
render value? A. Thirty-eight dollars.

Q. Now, take the age two, and assume the policy at ten cents

4902

Digitized by

Testimony of John F. Dryden

a week to have been carried for twenty-five years, what will be
the cash surrender value? A. Twenty-six dollars.

Q. The assumption on the policy issued at age twenty-one? A.
Forty-five dollars.

Q. And the policy issued at age forty? A. Forty-nine dollars.

Q. Why is it on receiving the same amounts of money from
the insured you have the variant surrender values? A. Because
of the greater risk in carrying the insurance upon these lives.

MR. GORE : They are the full term reserve.

THE WITNESS : Yes, that is the explanation, the full term
reserve. The reserve is greater, therefore the cash surrender
value is greater.

Q. If a policy is issued at age sixty, and ten cents a week is
paid, the amount at the end of twenty years is how much? A.
Twenty-seven dollars.

Q. And that is less than the amount of a policy issued at age
twenty-one? A. Yes, sir.

Q. How do you account for that?

MR. GORE: The amount of the policy is a great deal less.
A. The man at age sixty would get less insurance.

Q. For the same payment? A. For the same payment.

Q. So that the maximum surrender value corresponds to the
maximum insurance and the maximum reserve for the same pay-
ment? A. Yes.

Q. In other words, you have a fixed payment of so much a week
and the amount of insurance a man gets depends upon his age
and expectation of life ? A. Yes.

Q. And the amount of the cash surrender value varies accord-
ingly ? A. Yes, sir.

4903

Digitized by

Testimony of John F. Dryden

Q. Now, those are all the benefits which are receivable exclu-
sive of the death benefit under your industrial policy? A. Yes,
sir.

Q. What amount did you pay out in your industrial department
for cash surrender values in 1904? A. Have you got that table
right there, Mr. Gore?

MR. GORE : We have not any table of our cash surrender val-
ues in the industrial department.

THE CHAIRMAN: When you finish this topic we will take

MR. GORE: We can furnish that.

THE WITNESS : The actuary will furnish you that informa-
tion.

MR. HUGHES : Permit me a question or two before we ad-
journ.

received. Have you a statement showing the amounts of prem-
that statement here, Mr. Gore?

MR. GORE : No, we have not those separated.

MR. HUGHES: You can easily make the separation.

MR. GORE : It is about twenty-six and a half million dollars,
but we can find that for you.

4904

Digitized by

Testimony of John F. Dryden

me the data for the Industrial Department separated, showing
endowments, if any, the surrender values paid and the dividends
credited, and the totals to policyholders in that department for a
period, say, of five years, that would be a very useful table, indeed,
to have.

THE WITNESS: Can you have that to-morrow morning,
Mr. Gore?

MR. GORE : Some time during the day.

Q. I want to ask you before we leave this subject to-nig^t,
what is done in case a man lapses, to revive him ? Do you have
a medical examination ? A. No, not within the first year of lapse.

Q. After the first yeat* of lapse, do you have a medical exami-
nation? A. Yes, sir.

Q. Does he have to pay all the arrears? A. Yes, sir.

Q. Why would it not be better for him to take out a new policy?
A. Because the policy it not at first in benefit, in full benefit ; if he
has maintained a policy for one year it becomes in full benefit.
Now, if he lapses that and takes a new policy he has got to go
through that probationary period and be for a considerable portion
of the year uninsured or insured for a less amount.

Q. When you speak of full benefit, you mean that the policy
provides that if the insured shall die within six calendar months
from its date the company will pay only one-quarter of the sum ?
A. Yes.

Q. And if the insured shall die after six months and within
one year the company will only pay one-half of the sum? A.
Yes.

Q. And after one year it will pay the full amount? A. Yes.

4905

I

Digitized by

Testimony of John F. Dryden

Q. Then that also means that having a longer period of insur-
ance to aid him in complying with the conditions upon which he

becomes entitled to these privileges A. Yes, sir; and also that

he will be one year older than he was when he first insured, and
consequently the sum of his insurance would be z little less.

Q. But when he is revived and pays up the arrears and is re-
insured you treat that as new business on your books? A. Yes,
sir ; that is, it appears to be a new policy.

Q. Do you give your agents commission on it? A. The agent's
commission is based upon two features; first upon a percentage
upon the amount of money that he collects, which is called the
ordinary salary, and second, an amount based upon the net in-
crease in its collectible debit. Now, if he reinstates an old
policy, the effect upon him is just the same as though he had writ-
ten a new policy, so far as that amount is concerned.

MR. GORE: Senator, we do issue policies, you know, with a
policy lien, where they do not have to pay up the arrears of pre-
miums. We revive those.

THE WITNESS : Yes. I want, if you please, to add to my
statement, that we do revive old policies and take a lien upon the
policy without any cash payment by the policyholder. The policy-
holders sometimes are unable to pay the arrears, but want to con-
tinue the insurance, and we take a lien without requiring any cash
payment.

Q. It is called to my attention that not only are your rates in the
Industrial Department higher than in the Ordinary Department,
but in our comparison we took the total amount of the benefit on
the industrial policy at the end of the year, but as a matter of fact
through the first year the policy is only good for a quarter of that
amount during the last six months. A. Yes.

4906

Digitized by

Testimony of John F. Dryden

Q. So, that really for the first year's insurance, c<Mnparing the
industrial policy with a non-participating ordinary policy, the in-
sured is paying during the first six months eight times as much as
he would be paying on the non-participating policy, and during
the last six months four times as much. A. I want to explam to
you about that partial benefit during the first year. I have already
explained to you the nature of our medical examinations, that the
business is such, and the initial payments are such, that the com-
pany cannot afford to have a thorough medical examination as we
do in the case of the ordinary life insurance. Now, it would be
in the first place too much of a risk for the company to take during
the early months, to pay these policies in full immediate benefit, and
besides it would cost so much to pay for the medical examinations,
which would justify the company in taking that risk so early in the
life of the policy, that it would make it prohibitory. Therefore,
societies have adopted, of charging an initiation fee, we get the
equivalent by obligating ourselves for a less amount of risk during
the early months of the policyholder.

THE CHAIRMAN: The Committee tomorrow will probably
meet in the Aldermanic Chamber at the other end of the building
as usual. An adjournment will now be taken until 10.30 o'clock
tomorrow morning sharp.

MR. HUGHES : Mr. Chairman, Mr. Lindabury desires me to
have corrected an answer in, Senator Dryden 's testimony.

THE CHAIRMAN : Very well.

BY MR. HUGHES:

Q. I asked you, Senator, what the agreement was that you en-
tered into with the Massachusetts Department, and you answered :

4907

Digitized by

Testimony of John F. Dryden

**That agreement was that the company would not have at risk
in any one trust company or bank, either by the ownership of the
capital stock, or deposited, or both, more than fifty per cent, of
its surplus. Is that right, Mr. Ward? Yes."

Will you state whether that answer was correct, and if not give
me a correct answer to the question, what the agreement was with
the Massachusetts Department

MR. LINDABURY: That is correct, copied from your min-
utes.

(Handing paper to witness.)

THE; WITNESS : I wish to amend my answer by saying that
we also included any amount that might be loaned upon collateral
securities.

MR. LINDABURY : Upon the collateral of those stocks.

THE WITNESS: Precisely, upon the collateral of those par-
ticular stocks. In other words, that we should not have more than
cme-half of our surplus at risk at any one time, in any one bank or
trust company.

MR. WARD : This is taken from the agreement. * That agree-
ment was that the company would not have at risk in any one
trust company, bank or other financial institution, either by the
ownership of the capital stock, or deposited by loan upon the stock
of such trust com|)any, bank or other financial institution, or all
three, or more than fifty per cent, of the net surplus as determined
by the said Insurance Commissioner.

4908

Digitized by

Testimony of John F. Dryden

BY MR. HUGHES:

complied with? A. Completely.

(Adjourned to Wednesday, December 13th, 1905, 10.30 A. M.)

4909

Digitized by

Digitized by

COUNCIL CHAMBER,
City Hall, New York City.

December 13th, 1905.

The Committee met pursiiant to adjournment, Senator Arm-
strong in the chair.

JOHN K. GORE resumed.

BY MR. HUGHES:

Q. Mr. Gore, have you a statement showing the benrfits and
dividends credited to policyholders in the Industrial Department?
A. (Producing paper.) Those two.

Q. The paper you offer me is the amount of additional benefits,
which, after five years, are credited to the policyholders in the In-
to the insurance in case of death after five years, the first privilege
mentioned in the policy ? A. It is.

MR. HUGHES : I oflEer the table in evidence.

(Paper marked Exhibit 689.)

Q. Have you a statement of the amount of death claims paid on
industrial policies at hand ? A. I will have a better erne in a few

491 1

Digitized by

Testimony of John^ K. Gore

minutes. This is the first draft, but it is all right (handing paper)

Q. The statement you now hand me is limited to industrial poli-
cies? A. Yes.

Q. It would appear that in 1904 the total amount paid upon
death claims was \$8,637,287. Now of that \$8,637,287, \$93,760.34
consisted of the additional benefits payable under the first privi-
lege? A. That is right.

Q. You have also produced a statement of the cash dividends
credited to the policies in the Industrial Department? A. I have.

Q. What is meant by the colmnn headed fifteen-year dividend
in this statement? A. The policy provides for a cash dividend
after fifteen years and a cash dividend at the end of each fifth year
thereafter. The first column represents the fifteen-year dividend.

Q. The second column headed fi!ve-year dividend represents
what? A. Dividends paid at the end of five-year periods there-
after.

Q. The total amount of such five-year dividends? A. Yes.

Q. Paid in the year opposite which the amount appears? A.
Yes.

MR HUGHES: I offer that table in evidence.

(Paper marked Exhibit No. 690, and read by Mr. Hughes.)

Q. Now this statement that you have just handed me shows the
inclusive, the death claims paid, the surrender values paid, the divi-
dends paid or credited ? A. Paid.

Q. Paid, with the policies? A. Those include the additional
benefits as well as the cash dividends ; the cash dividends are paid
on the policies still in existence.

Q. Well, they are credited, are they not? A. Yes, credited to

4912

Digitized by

Testimony of John K. Gore

the policies each year as paid out during the year. Those are paid
in cash.

Q. Those dividends that you refer to after fifteen years and at
each period of five years thereafter are payable in cash if the pol-
icyholder desires to take them? A. Yes, they are paid in cash.

Q. And the amounts of such payments are included in the total
dividends here stated? A. Yes.

Q. And then in the fmal column you have the total pajrment to
policyholders? A. Yes.

MR. HUGHES : I oflfer the table in evidence.
(Paper marked Exhibit 691.)

MR. HUGHES : From this table it appears that in the year
\$I7>5<^7>655.55 ; and in that year there was paid in all to policy-
holders \$6,313,344.71 ; that amoimt being distributed as follows:
Death claims, \$5,559,10543; surrender values, \$320,449.65; in
dividends, \$433>789-64.

In the last year on the statement,. 1904, it appears that the
943,891.14, and that the total paid to policyholders was \$9,884,-
461.09, consisting of death claims, \$8,637,287.00; surrender val-
ues, \$596,680.00; dividends to policyholders, \$650493.00.

In the five years, i960 to 1904 inclusive, the total amount of
to policy holders is \$39,240,948.52, of which \$34,598,637.97 was
paid upon death claims, \$2,046,739.01 for surrender values, and
\$2,595,571.54 for dividends to policyholders.

Q. There is also a statement of the amount included in sur-
render values, for cash surrender value; what is meant by that?

4913

Digitized by

TesUnwny of John K. Gore

A. The total item^ surrender values, includes the values of paid-
up policies as well as surrender values paid in cash.

Q. Well, do you mean that you include in the total payments
to policyholders the amotmt of the value of paid-up insurance
upon which no moneys have been paid ? A. Yes, that goes right
into our reserve.

Q. Yes, but you have got a great deal that goes into your
reserve which you do not schedule as paid to policyholders. A.
Well, that is the requirement of all the State Departments.

Q. Do you include in your statement of outstanding insurance

Q. And you have you** reserve against those as you do against
your other policies ? A. Yes.

Q. But when you are making up a statement of the payments
you have made to policy holders you do not include insurance
policies upon which in fact you have made no payment, do you ?
A. We follow the requirement of the State Departments and the
amount of money we transfer from our reserve as single pre-
miums for insurance goes under the head of payments to policy-
holders. We have no control over that item.

Q. Then of the \$2,046,739.01 which is stated here as surrender
values and included in the total payments to policyholders, how
much was actually paid in cash during the years 1900 to 1904
inclusive? A. A little more than \$125,000

Q. Give me the exact amount if you can add it rapidly ? A.
\$145,947.74.

Q. And the residue of about \$1,900,000 included tmder the

1  ...  6
7
8  ...  60

 Using the text of ebook TESTIMONY TAKEN BY THE JOINT SELECT COMMITTEE TO INQUIRE INTO THE CONDITION ... by U.S. Census Bureau active link like:read the ebook TESTIMONY TAKEN BY THE JOINT SELECT COMMITTEE TO INQUIRE INTO THE CONDITION ... is obligatory. Leave us your feedback.